BusinessWorld: BNPL players use alternative consumer data to manage credit risks

(REPOST from BusinessWorld, written by Patricia Mirasol) Buy now, pay later (BNPL) is a worldwide trend, even in developed countries like the US. According to experts at a Feb. 10 webinar by Fintech News Network, merchants in the Asia Pacific region that are offering this service manage credit risk by relying on alternative data such as the average value of consumer’s mobile phone.

Missed the webinar? Access the recording here →

BNPL is a payment option that allows consumers to make purchases and pay for them at a future date, often interest-free. Among the companies that have ventured into point-of-sale installment loans, as BNPL is also known, are Visa and PayPal.

“The credit footprint of consumers in emerging markets is super small. It is one of the main reasons investor money is going to BNPL,” said Anindya Datta, founder and CEO of Mobilewalla, a Singapore-based consumer intelligence platform. In countries where a consumer’s purchasing power is restricted, extending credit is a means to exert that power.

Data is predictive of how likely someone is going to default, Mr. Datta said.

“We found that — across Southeast Asia and South Asia — the average value of a handset [mobile phone] is super predictive of how likely you’re to default on a loan,” he told the audience at the webinar. “In India, it turns out the maximum handset value in a household is a much stronger predictor of default.”

Behavior patterns such as mobility can also predict the likelihood of a loan default. Mobilewalla, Mr. Datta said, was able to increase the collections of an Indian client with an 8% delinquency rate by providing geography metrics pertaining its errant customers.

“The loan default likelihood positively correlates with the radius of gyration [which calculates the moment of inertia of bodies] after a certain point,” he added.

Read original and full article from BusinessWorld

BusinessWorld is a business newspaper in the Philippines with a nationwide circulation of more than 117,000. Founded in 1967 as Business Day, it is Southeast Asia's first daily business newspaper.